It is worth repeating an article we first published March 2016 that highlighted the cash benefit to company car drivers and their employers, of reimbursing the cost of fuel provided for private motoring. The rates have been updated for 2016-17.

Since the tax on private fuel provided with company cars is so high, many employers now have an arrangement whereby they no longer pay for private fuel. In this case, the employee must reimburse the employer for private fuel included in petrol bills paid by the employer. Otherwise, the employee may face a tax charge.

Consider the following example:

If your private mileage is currently 560 miles a month, and you drive a 1900cc diesel engine car, the rate per mile to cover fuel charges, as quoted in the latest rates published by HMRC, is 11p per mile. Accordingly, you should repay £61.60 a month to your employer.

Based on the above example, if the vehicle’s list price when new was £25,000, and the car benefit charge rate was 26% (based on a 130g/km CO2 rating) the benefit in kind charge for the year would be £6,500. With no repayment of private fuel, there would also be a £5,772 car fuel charge. Both these amounts would be added to your taxable income for the year. If you were a higher rate tax payer the car fuel charge would cost you £2,308.80 a year in additional tax (£5,772 x 40%). This amounts to £192.40 per month.

If your actual private mileage proved, on average, to be 560 miles a month, you would therefore save £130.80 per month (£192.40 – £61.60).

Employers will also benefit as they will no longer be subject to a National Insurance charge on the amount of the car fuel benefit. In the above example, it would reduce NIC costs by £796.54 (£5,772 x 13.8%).

It is worth crunching the numbers. Obviously, the lower your private mileage, the more likely a repayment system will save you money, but you will need to take action before the 5 April 2017.

From 1 December 2016, the advisory fuel rates have changed to:

1400cc or less: petrol 11p per mile, LPG 7p per mile

1401-2000cc: petrol 14p per mile, LPG 9p per mile

Over 2000cc: petrol 21p per mile, LPG 13p per mile

Diesel rates:

1600cc or less: 9p per mile

1601-2000cc: 11p per mile

Over 2000cc: 13p per mile

These rates can be used from 1 December 2016 to calculate the petrol content of mileage rates paid to employees, or as a basis to repay private petrol provided by employers for the use of a company car (see previous article).

This is also an appropriate time of the year to consider your CGT position if you have already disposed of (or are considering a disposal) of an asset subject to CGT during 2016-17.

Most of our readers will be aware that they can make chargeable gains of up to £11,100 in the tax year 2016-17 and pay no CGT. This exemption cannot be transferred to a future tax year or carried back to a previous tax year if it is not utilised.

Many will also remember that it is no longer feasible to sell shares before 6 April 2017 in order to crystallise a CGT loss or a gain that is covered by the above exemption, if those shares, or part of them, are reacquired within 30 days of the disposal. However, it is still possible to reacquire holdings, within the 30 days period, if you use an ISA or self-invested personal pension (SIPP) to make the buy-back.

Transfers of chargeable assets for CGT purposes are exempt between spouses and civil partners. Also, the annual exemption is available to both parties. This combination means that couples may be able to share the gain on a disposal of assets and reduce their overall CGT charge.

This strategy, of transferring partial ownership to a spouse, can also reduce an overall CGT charge if the transferring partner/spouse is due to pay CGT at the higher 20% or 28% rate (as their gains fall to be taxed in the higher rate tax band) and the receiving partner/spouse would only be liable to pay CGT at the lower 10% or 18% (as their share of a transferred gain would fall into their free basic rate band).

The 10% and 20% rates apply from April 2016, but do not apply to disposals of residential property or carried interest – for these latter items, disposals are taxed at 18% to 28%, dependent on where the gains sit in the basic or higher rates bands.

And don’t forget, CGT is assessed and payable as part of your self-assessment. Any tax payable for 2016-17 will be due for payment 31 January 2018. On the same day you will also have to pay any other underpayment of income tax for 2016-17 and your first payment on account for 2017-18.

If you own assets that are subject to CGT on disposal, and you, and possibly your spouse, are struggling to fully utilise your CGT annual exemption, or you would like to discuss ways to minimise any CGT payable, please call to discuss your options.

1 January 2017 – Due date for corporation tax due for the year ended 31 March 2016.

19 January 2017 – PAYE and NIC deductions due for month ended 5 January 2017. (If you pay your tax electronically the due date is 22 January 2017)

19 January 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2017.

19 January 2017 – CIS tax deducted for the month ended 5 January 2017 is payable by today.

31 January 2017 – Last day to file 2015-16 self-assessment tax returns online.

31 January 2017 – Balance of self-assessment tax owing for 2015-16 due to be settled on or before today. Also due is any first payment on account for 2016-17.

1 February 2017 – Due date for corporation tax payable for the year ended 30 April 2016.

19 February 2017 – PAYE and NIC deductions due for month ended 5 February 2017. (If you pay your tax electronically the due date is 22 February 2017)

19 February 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2017.

19 February 2017 – CIS tax deducted for the month ended 5 February 2017 is payable by today.

The Intellectual Property Office has issued a video setting out the dangers of buying counterfeit goods this Christmas.

They say:

Counterfeiting can be defined as the manufacture, importation, distribution and sale of products which falsely carry the trade mark of a genuine brand without permission and for gain or loss to another. Counterfeits can bring many dangers to us as consumers. From fake alcohol to children’s costumes…if it can be made, it can be counterfeited. Make sure you understand the risks.

Do you really know what you’re getting for Christmas?

We recently broadcast live talking about IP crime and the dangers and impact of buying counterfeit goods in the run up to Christmas.

You can view the video on the Gov.uk website at https://www.gov.uk/government/news/dont-have-a-fake-christmas

The answer to this question depends, in the first instance, on the business structure you select.

If you run your business as a sole trader, or in partnership with another person, you are deemed to be self-employed. Partnerships also include Limited Liability Partnerships where the partners’ personal assets are protected from business risks.

The alternative to the above self-employed options is to incorporate your business, to be a limited company. In this case the company legally owns the business and you are an employee of the company, and in most cases, a shareholder too.

Sole traders and partners

As defined above, tax payers in this group are self-employed and subject to self-assessment for income tax purposes. Profits of your business, adjusted for tax purposes, are included in your annual self-assessment tax return and provide the basis (together with any other income you earn) of your half yearly income tax payments under self-assessment.

Additionally, there are National Insurance considerations. Presently, you will pay Class 2 and Class 4 contributions and these are collected with your income tax payments. Class 2 is a fixed weekly amount, and Class 4 contributions are graduated, based on the amount of profit you make. The government is to phase out Class 2 contributions shortly and adjust Class 4 contributions to provide for basic State benefits such as the State Pension.

Limited companies

Companies do not pay income tax, instead, they are subject to corporation tax.

Corporation tax is based on a fixed percentage of adjusted profits plus any chargeable capital gains the company makes.

Directors are treated as employees by the company. Any salary taken is taxed under the PAYE system and forms part of the allowable costs of the company. The amount of any income tax or National Insurance due will depend on the amount of salary taken.

Directors, who are also shareholders, may also choose to take part of their remuneration as a dividend. This is a distribution of taxed profits by the company and so no further tax consequences apply to the company. Dividends received by shareholders are subject to personal tax if they exceed £5,000 in a tax year. The rate of tax payable depends where the dividends sit in the tax payer’s basic, higher or additional rate income tax bands.

As you can see, business structure determines tax treatment, and the selection of the most appropriate structure is of paramount importance, both to ensure you minimise taxes due and protect your personal assets.

This service helps people to detect fraudulent activity on their property by sending them email alerts when there is certain activity on the property being monitored, such as a mortgage being taken out against it. The recipient can then decide whether they think the activity is suspicious and act quickly if so. The alert email tells them who to contact should they be concerned. The following notes are part of a recent announcement on this issue on the gov.uk website.

Alasdair Lewis, Director of Legal Services, said:

Property is usually our most valuable asset so it’s important to protect it from the ever-increasing risk of fraud. Land Registry is doing all it can to detect and prevent fraud but no system can be 100 per cent fraud-proof, which is why we urge people to follow our advice about protecting themselves from property fraud, including signing up for Property Alert.

Property fraud

Property fraud is where fraudsters try to “steal” a property, most commonly by stealing the homeowner’s identity and selling or mortgaging the property without their knowledge. They then disappear with the money leaving the true owner to deal with the consequences.

Since 2009, Land Registry has stopped fraud on properties worth more than £92 million.

How Property Alert works

You can monitor up to 10 registered properties in England and Wales. You will receive email alerts when there is certain activity on the properties you are monitoring, such as an application to change the ownership details.

Although Property Alert won’t automatically stop fraud from happening, it’s a useful early warning of suspicious activity which the home-owner can investigate if they are suspicious.

Example of how Property Alert helped to prevent a fraud

A landlord was renting out a property in England while he lived overseas. He was aware that absent landlords are more at risk of property fraud and signed up to our free Property Alert service. When he received an alert email informing him of a mortgage application being made against his property worth over £300,000, he contacted our property fraud line immediately as he wasn’t expecting this. Using this intelligence, we investigated and discovered the fraud. We then prevented the application from being registered. His contact details were out of date, so we advised him to update them, which he did so that if we need to contact him in the future he will receive our emails or letters.

Most at risk

You’re more at risk if your property:

• is rented out
• is empty
• is mortgage-free
• isn’t registered with Land Registry

Other fraud protection measures

To help protect yourself against property fraud, make sure:

• your property is registered. If you become an innocent victim of fraud and suffer financial loss as a consequence, you may be compensated. Properties most likely to be unregistered are those that haven’t changed hands or been mortgaged since 1990
• Land Registry has up-to-date contact details so we can reach you easily. You can have up to three addresses in the register including an email address and/or an address abroad

You can find out more about this service at https://www.gov.uk/guidance/property-alert

As we have noted in previous blog postings, Philip Hammond announced a significant change to the VAT Flat Rate Scheme (FRS) from 1 April 2017.

To join this scheme, businesses need to have turnover excluding VAT of under £150,000. VAT payable to HMRC is based on a fixed percentage of turnover including VAT. The percentage rates vary for different business sectors, and obviously the lower the rate, the lower the quarterly VAT bill.

Many users of the FRS have discovered that using the scheme means that they make a cash profit. This happens when the appropriate FRS rate produces a VAT bill that is lower than the cash collected from the VAT output tax added to sales (which FRS traders are required to do), less any input VAT added to goods and services purchased.

HMRC have decided that this is not the outcome they intended when setting up the scheme.

Accordingly, from 1 April 2017, users of the FRS scheme will be obliged to use the higher rate of 16.5% if they are classified as a “limited cost trader” (LCT). The LCT classification will apply to users of the FRS whose VAT inclusive costs are:

• lower than 2% of their VAT inclusive turnover in an accounting period
• greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000).

Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:

These exclusions are required to prevent traders buying either low value everyday items or one-off purchases in order to inflate their costs beyond 2% and thus continue to pay VAT at a rate lower than 16.5%.

Existing users of the FRS are advised to seek advice before 1 April next year to determine if they are affected by these changes. In some cases, traders may need to discontinue use of the FRS and switch to the use of the standard VAT scheme.

For a number of years, it has been possible to make gift aid donations and carry them back to the previous tax year. This is a useful tax planning facility if earnings were higher in the previous year, and in some cases it may mitigate loss of personal allowances and tax at higher rates.

There are, however, two conditions that need to be complied with:

1. Firstly, you cannot claim to carry back gift aid donations once you have submitted your tax return for the current year. Consequently, if it would be beneficial to carry back gift aid contributions you have made since 5 April 2016, as if paid during 2015-16, you will need to make the claim when you file the 2015-16 return. This means that the latest date to action this type of claim is 31 January 2017.
2. Secondly, you will need to have paid enough Income Tax or Capital Gains Tax in the earlier year to cover the tax that the charities reclaim on those donations.

For higher rate tax payers, especially those with taxable income in excess of £100,000 this strategy is a useful device to reduce tax payments in a year by utilising transactions made after the end of the tax year. In fact, this is the only readily accessible carry-back planning tool available to most tax payers.

A lasting power of attorney (LPA) is a legal document that lets you (the ‘donor’) appoint one or more people (known as ‘attorneys’) to help you make decisions or to make decisions on your behalf. There are two sorts of LPA. They can cover personal issues (health and welfare) or financial issues (property and financial affairs).

An LPA allows you to nominate who has control over what happens to you if, for example, you have an accident or an illness and can’t make decisions at the time, or if you for other reasons, ‘lack mental capacity’ to make prudent decisions on your own behalf.

You must be 18 or over and have mental capacity (the ability to make your own decisions) when you make your LPA. You can choose to make one type or both.

Please note that there are different process for registering LPAs in Scotland and Northern Ireland.

How do you make an LPA?

This is a three stage process:

1.      First, you must choose your attorney – the person who will have control over your affairs – and you can have more than one.

2.      Secondly, you will need to complete the relevant forms to appoint them as an attorney, and finally

3.      Register your LPA with the Office of the Public Guardian (this can take up to 10 weeks).

It costs £110 to register an LPA unless you get a reduction or exemption.

Unfortunately, you will need to register both LPAs if you want to cover all your risks so the above costs are doubled.

If you want to find out more about the process you can contact the Office of the Public Guardian at:

Office of the Public Guardian
customerservices@publicguardian.gsi.gov.uk
Telephone: 0300 456 0300
Textphone: 0115 934 2778
 

Or, you can take professional advice.